THE NEXUS OF FINANCIAL DEEPENING AND POVERTY: THE CASE OF BLACK SEA REGION ECONOMIES

This paper analyzes the effect of financial deepening on poverty in the emerging Black Sea market economies with new generation causality analysis techniques utilizing panel data from 1996 to 2020. The econometric method of panel data is applied to the six emerging economies. It can be seen that the causal relationship between domestic loans to the private sector (DPS) and per capita household consumption expenditure (HCE) is significant in Georgia, Turkey and Ukraine. In addition, a bidirectional causality relationship is observed in Georgia. Romania, Georgia, Turkey and Ukraine are countries where the causality between HCE and DPS is significant. It is concluded that DPS increases per capita HCE and thus effectively reduces poverty.

Automated summary

This paper analyzes the impact of financial deepening on poverty in the emerging Black Sea market economies. Utilizing panel data from 1996 to 2020 and employing new generation causality analysis techniques, the study finds significant causal relationships between domestic loans to the private sector (DPS) and per capita household consumption expenditure (HCE) in Georgia, Turkey, and Ukraine. Moreover, a bidirectional causality relationship is observed in Georgia. Romania, Georgia, Turkey, and Ukraine are identified as countries where the causality between HCE and DPS is significant. The paper concludes that increasing DPS leads to higher per capita HCE and effectively reduces poverty.